With contributions from Chi Kong Lui, Brad Gallaway,
Thom Moyles, Mike Bracken and Mike Doolittle
When a company with the reputation of Microsoft's decides to test other markets, people take notice. Microsoft surprised a few people when it was announced a deal with Sega to use the Windows CE operating system in the 128-Bit Dreamcast console. However in hindsight, its clear that the console industry had become far too lucrative for a corporation like Microsoft 
to ignore for too long. In 1999, rumors began to make the rounds that Microsoft was going to step out of the background. Some reports said that Sega and Microsoft were collaborating on a follow-up to the Dreamcast that would use more advanced PC technology while others had Microsoft going it alone with a "dumbed-down" PC.
Whatever opinion one may have held towards Microsoft, it was hard to dispute that such a move would have great repercussions on every segment of the industry. The story of Microsoft's entry into the console arena grew quickly and raised expectations to a level that was only surpassed by the unprecedented amount of media coverage and industry buzz afforded to Sony and its PlayStation 2. Getting the real story behind the Xbox would have been quite a coup for any writer, but since this was Microsoft—a company known for being especially tight-lipped—there was little in the way of an insiders take on the new technology. Thankfully, Dean Takahashi, a writer for Red Herring magazine, got "inside" the company and was able to chronicle the journey of the Xbox and Microsoft from early conception to its ultimate launch in the Fall of 2001. His book is called "Opening the Xbox: Inside Microsoft's Plan to Unleash an Entertainment Revolution" and GameCritics.com is pleased be able to talk to Mr. Takahashi about this breakthrough book.
Let's begin the interview by getting to know you a little better. Please tell us about Dean Takahashi the gamer. What videogames originally got you hooked and what are some of your all-time favorite titles? Do you still find time to play games?
I played the original Pong with my brother for the first time while on a family vacation to Las Vegas. It was at the indoor tennis courts at the Tropicana Hotel. We played it and thought it was the greatest thing. We went on to become 
arcade rats, playing games like Space Wars, Gun Fight, Coleco's handheld football games, Galaga, Ms. Pacman, Zaxxon etc. We had some early consoles like the Odyssey and Intellivsion. During college, I budgeted about $30 a month to play games in the arcade and found I was in the minority among my friends by going to the arcades so much. I dropped out of the console and game scene for a while and returned when I got my first computers. But I really immersed myself in gaming again with the original Wing Commander for the PC. I played that game until my arm got sore and I would have to switch to my left hand to control the joystick. I loved the original Doom and its offspring.
In the last decade or so I've been a big computer game fan, playing war games like Talonsoft's West Front and Combat Mission, as well as real-time strategy games like Age Of Empires and Close Combat II, III and IV. I love innovative games like The Sims and Black & White and SimCity. Liked Shogun a lot. I enjoy business simulations like the original Capitalism. Among the console games, I like Motocross games among friends and for solo I've played through Halo on the normal mode. The worst thing about writing a book was that I had to give up playing games for about 18 months. Now I'm gradually getting back into it with games like Medal Of Honor: Allied Assault and Battleground 1942. Sorry to go on for so long but you asked.
There are only a handful of respected journalists that are renown for covering the videogame industry for major publications like MSNBC, The NY Times and Red Herring. How did you get to be one of them?
Respect is a funny thing. If you mean my work is read widely in the mainstream press, then I'd agree. I write about gaming as a business, and games as they can be understood by the mass market. I wouldn't say, on the other hand, that I'm completely respected by gamers and by game companies. I don't play nearly as much as some of the enthusiast press plays, and I'm not particularly skilled in tournament play. But I love what I write about and I think that is how I got my reputation. I played for a long time and started writing about games at the Wall Street Journal around 1997. The beat was open and nobody in the office wanted to cover it. In fact, I was the youngest guy in the office and probably the only one that understood gaming. So I picked it up and have happily covered it for six years. I wrote the first review of an electronic game that appeared in the Wall Street Journal's weekend section. But many mainstream publications still 
don't cover gaming like they should. I'm glad to be going back to a job at the San Jose Mercury News, where they do get gaming. I have been a journalist for 15 years and have only written about games for six. I guess you could say I established my reputation as a tech journalist first, then switched into a focus on games when I had a following.
Let's move on to your recent book "Opening the Xbox". How did this project come to be?
I was chasing the original rumors of the Xbox while working for the Wall Street Journal. Tom Russo of Next Generation beat me to the first story. But I stuck with it. I reported in October 1999, that Microsoft was prepared to spend billions on the Xbox. Then I wrote a story in March 2000, on the four renegades who proposed the Xbox to Bill Gates. I had also met Seamus Blackley while he was doing Trespasser and followed his career. I thought the Xbox genesis was a natural book, something as fun to write about as The Soul of a New Machine. I left my job at the Wall Street Journal to join the Red Herring in June 2000. I was thinking I would do a book on the Xbox while I was at the magazine. But I didn't truly get started until I visited Redmond and Microsoft's PR people asked me if I wanted to do it. I said would do so, but only if it was an independent journalistic effort, not paid for and endorsed by Microsoft. I proposed the book in August 2000.
Microsoft is notorious for being a very secretive and tight-knit company. Was it hard to get the people involved to tell the Xbox story? What were some of the specific roadblocks that you had to overcome to put this book together?
It was both easy and hard. I had credibility as a mainstream journalist. People on the team trusted me to get their story right, and they wanted their story told. Once some of them began to tell me their stories, they cleared the way for others to talk to me. That was like getting someone to trust you in the military or a cult. Once you're in, you're able to talk to them freely. But much of the talking had to be done unofficially and in secret. Naturally, the PR department didn't want to give me unfettered access. I asked to sit in on planning meetings and they declined to open up. I asked for meetings with top executives repeatedly and it took many, many months for it to happen. The standard answer was that the team was too busy to talk.
Fortunately, the low-level employees and the former employees helped me immensely, and they gave me things to ask the top executives. Once confronted with details, most executives answered questions honestly and openly. But, beyond an email interview and a brief chat at a reception, I never got to interview Bill Gates. I submitted questions to him but he didn't answer in the final stages of the book-writing process. However, Bill stated his opinions openly at many meetings and many public places, so I was able to depict his point of view. Of course, it 
was hard because much of the time everyone's memories of meetings were foggy and conflicted with each other. But I had to go back and ask people again and again for clarifications. That's why I'm confident that what I have described in the book is accurate.
What would you say is the most surprising thing you learned about Microsoft?
It's not a monolithic company with a single mission. It's more like an organic being, morphing constantly and changing with the political winds that favor certain individuals, technologies, or camps within the company. I found that the deeper you dug, the more you could learn about rivalries within Microsoft and the struggles that took place that the public never gets the see. Case in point: the Web TV battle with the Xbox team.
Was there any fallout between you and Microsoft after the book was published?
No. I continue to interview Xbox people, as arranged by the PR staff. They don't endorse the book and generally don't comment on the details in it. But they treat me like a journalist that they need to keep posted on all things Xbox. I did an extra chapter on Japan for a Japanese translation of the book, which launches in November, and they arranged interviews for that.
Give us your thoughts on the Xbox. What were some of the missteps that Microsoft has taken that have hurt the Xbox? Did Microsoft err in speeding up the development of the Xbox in order to compete more directly with the GameCube and the PS2?
Microsoft has been prudent about trying to contain the losses on the Xbox. But that, ironically, has been their biggest mistake at the outset. They priced the machine too high in Europe in order to save some money, but that really put them behind Nintendo in that market. In Japan, they didn't pay enough to get more exclusives. That has put them behind both Sony and Nintendo in another crucial market. They have long realized that they will lose billions of dollars in the video game market before they have a chance to make money. But now and then they make decisions that cause them to lose their resolve. They have been quick to learn. For instance, they cut the price to $199 in the U.S. in order to jump start sales, and they quickly cut prices in Europe. But every time they make an initial mistake, that costs them a loss in credibility.
As for erring in speeding up development, they didn't do that. In 1999, they faced a choice about whether to launch in 2000 or 2001. They opted for the 2001 option because that meant that Nvidia would have time to create a much better graphics chip to trump the PS2 graphics. That was a good decision in some respects. But they also doomed themselves to second or third place by launching so far behind Sony.
Because of the Xbox's near-PC architecture, it is the console that is most vulnerable to piracy and modification by users. How seriously do you think Microsoft is taking the problem of piracy and what are the methods that they will use to combat it?
This is correct in so far as people can develop hacks, like the MIT student did, to listen to unencrypted traffic on the MCP chip bus. But it is incorrect in some respects. Microsoft has centralized its online game service, making it closed in contrast to Sony's open approach. This has enabled them to vastly improve security in comparison to the PC. They can mandate that users have a single identity, making it easy to remove cheaters or other troublemakers from the online game service. They can download fixes or close vulnerabilities on the Xbox hard drives simultaneously through a single change to their servers, while Sony has no such ability. Microsoft is taking security issues very seriously, to the point where third-party publishers like Electronic Arts are complaining that it is asserting too much control.
In your book, the Xbox team members talk about how the powerful hardware of the Xbox allows for easier creation of artistic and inventive games. Yet so far we've seen very little of this claim reflected in the Xbox lineup. Do developers need more time to learn the nuances of developing for the Xbox or has it all just been marketing hype?
A lot of it has been marketing hype. On the other hand, look at Blinx. That Xbox game requires a hard disk drive to do innovative moves like rewinding the character's moves. Look at the comments of John Carmack about Doom III. It won't run on a PS2. It will be ported to run on the Xbox. I think many of the more creative, artistic games are going to be coming in 2003 and after. In particular, I think some of Peter Molyneux's work looks very promising.
Has the departure of an evangelist like Seamus Blackley hurt the long-term success of the Xbox?
I don't believe it has hurt the operational aspects of running the Xbox business. Seamus wasn't an operations guy with supervisory responsibilities. And Seamus really did wait until most of his job of getting developers, journalists, and gamers on board was done. I think his departure is a sad commentary about how grueling it is to work on a project like this. And I think a small number of people have lost faith in the Xbox dream. But the reality is most likely that they have not lost a single developer because of Seamus' departure.
What is the deal with Ultimate TV? It began as a separate entity that was actually in competition internally with the Xbox, but it looks like they will indeed be converging in the near future.
It is a possibility that this project code-named Freon will be introduced as an interim upgrade to the Xbox. But I have my doubts that they will try it unless they feel they need to juice a market like Japan. It represents a huge mid-course correction. I think that they will combine Ultimate TV in 2005 when they introduce Xbox 2. By that time, they will surely be able to solve the basic problem: how can you play a game at the same time the hard drive is being used to record a TV show.
With some talk of the HomeStation set-top box, do you think that Microsoft may be putting the cart before the horse since the Xbox has not yet established a firm foothold with its audience in terms of delivering quality games entertainment?
I don't think HomeStation itself will happen. It has been subsumed into the PC itself. Microsoft really has two bets right now: the Xbox and the PC. The PC will become more appliance-like, with new wireless technologies and new form factors that make it more useful in the home. The home for this initiative within Microsoft is eHome, and the first manifestation of the effort is the Windows XP Media Center Edition. Right now, I don't think Microsoft will do much with set-tops, especially with the failure of Ultimate TV.
What do you think of Xbox Live, Microsoft's online gaming strategy?
I think that the closed strategy that it represents will prevail in the long run over Sony's open system. It is simply more convenient, easy to use, hassle-free, and compelling. But 
the investment required for it is going to be very heavy for Microsoft, particularly in the costs of setting up data centers. Sony hasn't had to invest that much. Nintendo has invested even less. If the gamers subscribe gradually, and not in huge numbers, Microsoft will have made its investments too early. Sony will be able to up its ante when the gamers really show up. In that outcome, Microsoft's strategy will be a bad one. But if the gamers eat online gaming up, then its investments will pay off in a strategic advantage for the Xbox. I don't know what the outcome will be.
Let's talk about Microsoft's competition. What do you think of Nintendo and its GameCube in this current console war?
I think Nintendo is doing fine at the low-end and with the kids market. I think that the strategy of connecting to the Game Boy Advance is a good one. And I think their bets on winning franchises will mean that they will have the biggest hits. But I don't think that they're going to have nearly as many games as Microsoft. That may mean they will come in third place in the U.S. and perhaps in Europe too.
What are your thoughts on Sony and the upcoming PlayStation 3—and more specifically the "Cell" technology that is being developed to go into it?
Personally, I don't think they can pull off what they are promising right now. That is consistent for the grand claims they had for the PlayStation 2 (that it was more than a PC), which they backed off from as they actually produced the product. They are trying for a phenomenal increase in their processing power and they are allying with IBM because it's so expensive to develop these new chips. Microsoft, by contrast, merely has to wait for several generations of PC chips to be developed by Intel and Nvidia. My bet is that Sony won't have that much of an edge in processing power over the PC guys by 2005.
Much has happened in the Xbox camp since the book's release; do you now feel some parts of the book now read a little outdated? In hindsight, do some passages in the book now standout as pure marketing hype or do you feel Microsoft has lived up to its original vision of "games first"?
I have done a new chapter for the Japanese edition, which is releasing in November. In that, I pretty much said they did great with the U.S. launch and screwed up in Europe and Japan. At the end of the original book, I had to finish after the U.S. launch and before the other launches. That's why the future looked so bright for Microsoft. But I pretty much said there was no way for Microsoft to catch up to Sony, and that holds true. I don't think any of the passages in the book are marketing hype. Remember, I'm a journalist. I report what they say and I analyze it. The notion that they were going to change gaming—that is what they believed. I reported that, but I wouldn't say I endorsed that. Over time, I think they will have an impact and advance the art form. Right now, I only see their achievements as evolutionary. That's why the Xbox, for the moment, is much better used as a DVD player than a game player. When Halo 2 comes out, I may change my mind. Somewhere along the line, art will come.
Since you brought up the notorious 'a' word, let's discuss art and videogames a little further. Gamers and developers seem torn as to whether or not games should be considered art. Even respected developers like John Carmack and 
Shigeru Miyamoto have gone out of their way to distance themselves from being referred to as "artists." Why is there resistance to accept games as an art form? What needs to happen or change for videogames to be elevated to a higher cultural status?
This is one of those essay questions. I think it takes bigger and bigger hits, as well as deeper and deeper games. How to get there? I don't know. But as many artists say, when I see it, I'll know it. I think that the more the younger generation takes over in positions of power, in places like the media and in government, the more likely that games will take a higher place in culture. We're at the beginning of demographic changes. Some 80% of kids aged 8-12 play games. I don't think they're going to stop gaming. And many of the non-gamers over 40 are going to be a dwindling part of the population. Places like the New York Times and the Wall Street Journal have to run game reviews in the arts/weekend sections where the rest of the art reviews run. It's a slow process, but I see it as inexorable.
Opening the Xbox is a remarkable achievement on many levels. That said, do you have any regrets or was there something you would have done differently in hindsight? What is the most important thing you learned from the project?
My only regret is that the book could have been more complete if I had succeeded in attaining more interviews earlier in the process. I would have been delighted to interview Steve Ballmer, Rick Belluzo, and Bill Gates as well as many more people who were tangentially part of the Xbox, and even people like Ken Kutaragi. But time was pressing and the PR staffs kept me away from most of these people. Next time, I'll find ways to reach them if I try something like this again.
Now that you are no longer with Red Herring, what's next for you?
As of Monday, September 9, I'm starting a job as a staff writer at the San Jose Mercury News, where I have many friends and worked from 1994 to 1996. I'll be covering hardware, some chips and some games. I might do a book one day in the future, but I have to find the right story first.
We'd like to thank Dean Takahashi for taking the time to talk to us.
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